We're heading in the wrong direction with spending cuts

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We’re heading in the wrong direction with spending cuts

We need more government spending, not less. And it's cheap.

By Obdicut (Now with 2% less brain)

Economy • July 2011 • Views: 1,976

modeledbehavior.com

Right now, the market for US government bonds is so good that it would be cheaper for us to borrow a ton and spend it on capital improvements, research, and infrastructure then it would be to fund those things with tax revenue over time.

It’s disappointing to me that, yet again, the Democrats have failed to make their message meaningfully heard. This is a recession. The government should be spending money and keeping the velocity of money high because the definition of a recession is that private industry is not doing that.

Even most of the payment on the debt is money that goes back into the economy. Only a percentage of it flows outside the country.

The lack of financial education on the part of the American public is depressing.

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18 comments

Bob Levin Sun, Jul 31, 2011 11:12:10am

Believe it or not, I'm going to agree with you here.

The reason is this phrase:

spend it on capital improvements, research, and infrastructure then it would be to fund those things with tax revenue over time.

However, I think the Democrats believe that any government spending is good for the economy--such as a library with their name on it. It tends to take the form of pork. They also seem to like to form agencies in charge of the project, rather than letting a private company handle the job, in the same way that Kayser built merchant ships in World War II:

The government should be spending money and keeping the velocity of money high because the definition of a recession is that private industry is not doing that.

This is also true, and the creation of agencies tends to slow the velocity to an extreme nature. Let's just say that no one on Capital Hill seems to look at velocity as the key to economic health.

Obdicut Sun, Jul 31, 2011 11:33:05am

re: #1 Bob Levin

However, I think the Democrats believe that any government spending is good for the economy--such as a library with their name on it.

Why on earth are you saying that, though? To clarify, do you think that the Democrats, and only the Democrats, think any spending-- even building the world's largest ball of twine, is good?

And if so, why do you think this?

They also seem to like to form agencies in charge of the project, rather than letting a private company handle the job, in the same way that Kayser built merchant ships in World War II:

You know that the stimulus that didn't go to the states mainly went to private companies, right? So where are you getting this from?

This is also true, and the creation of agencies tends to slow the velocity to an extreme nature.

Can you please provide any proof of this, or anything to back it up?

Forgive me, but you appear to simply have just recited a string of talking points with nothing, absolutely nothing, to back them up. It's disappointing.

KronoGhazi Sun, Jul 31, 2011 12:26:59pm

re: #2 Obdicut

Forgive me, but you appear to simply have just recited a string of talking points with nothing, absolutely nothing, to back them up. It's disappointing.

Yes, things like 'you can't raise taxes, we pay too much in taxes, taxes this, taxes that.'

All said with faith and conviction. I believed many of those mantras for years but still haven't constructed any rational founding for them. I wonder if anyone else can.

Bob Levin Sun, Jul 31, 2011 12:32:48pm

Forgive me, but you appear to simply have just recited a string of talking points with nothing, absolutely nothing, to back them up. It's disappointing.

That's true, I didn't go into detail. But they're not talking points, since I'm not on anyone's side.

You know that the stimulus that didn't go to the states mainly went to private companies, right? So where are you getting this from?

History. Kayser was building ships at an unheard of rate. That's all. It's a question of management. Somehow the stimulus didn't translate into greater velocity. So, why did this happen? If my theory is flawed, and it might be, I'll listen to another.

Bob Levin Sun, Jul 31, 2011 12:34:53pm

re: #2 Obdicut

Why on earth are you saying that, though? To clarify, do you think that the Democrats, and only the Democrats, think any spending-- even building the world's largest ball of twine, is good?

Of course not. I said that no one on Capital Hill makes the connection between the economy and velocity.

I guess I'm on the side of velocity.

Obdicut Sun, Jul 31, 2011 12:42:45pm

re: #4 Bob Levin

That's true, I didn't go into detail. But they're not talking points, since I'm not on anyone's side.

That's without merit. You clearly are showing a gigantic bias against the Democrats.

History. Kayser was building ships at an unheard of rate. That's all. It's a question of management. Somehow the stimulus didn't translate into greater velocity. So, why did this happen? If my theory is flawed, and it might be, I'll listen to another.

But the stimulus did translate into greater velocity at the points where we expected it to, like food stamps. The stimulus was too weak and far too much of it was tax cuts.

I have no idea what your theory even is. It's not well-formed enough to be a theory.

History. Kayser was building ships at an unheard of rate. That's all.

I'm sorry, you're offering a single anecdotal piece of evidence as support for your conclusion?

What about comparing private insurers to medicare/medicaid, and noting the incredibly low overhead of the latter compared to the former? Public insurance is far more efficient than private insurance. How can that be, in your one-sided view of things?

I said that no one on Capital Hill makes the connection between the economy and velocity.

Obama does, given how much he pushed spending like food stamps and other programs that go right back into the economy. He's actually spent quite some time discussing this issue. As has Waxman.

I guess I'm on the side of velocity.

Not really, no. I do believe that you think that you are, but increasing government spending in a recession to increase the velocity of money is economics 101. And it's demonstrably provable, not just with the Great Depression here in the US, but in terms of the US states that have and have not engaged in 'austerity measures'. Those that are spending least are recovering slowest.

Bob Levin Sun, Jul 31, 2011 1:14:12pm

re: #6 Obdicut

That's without merit. You clearly are showing a gigantic bias against the Democrats.

That's not how I vote, so I think you're inferring too much.

I have no idea what your theory even is. It's not well-formed enough to be a theory.

My theory is that bureaucracy slows down velocity, generally. There are instances when it has increased velocity. It's well informed, but not necessarily ideological.

What about comparing private insurers to medicare/medicaid, and noting the incredibly low overhead of the latter compared to the former? Public insurance is far more efficient than private insurance. How can that be, in your one-sided view of things?

I don't have a one-sided view of things. If your facts are correct, you just explained how it can be, better management structure.

Obama does, given how much he pushed spending like food stamps and other programs that go right back into the economy. He's actually spent quite some time discussing this issue. As has Waxman.

Then I suggest he makes sure this gets into the headlines and does some network speeches to get this across to the public. I read the news everyday, and those notions need to make the headlines.

Not really, no. I do believe that you think that you are, but increasing government spending in a recession to increase the velocity of money is economics 101. And it's demonstrably provable, not just with the Great Depression here in the US, but in terms of the US states that have and have not engaged in 'austerity measures'. Those that are spending least are recovering slowest.

I did start out my comments by saying that I'm agreeing with you, precisely because of your use of key words which were compatible with velocity. Are you arguing with me on the contention that I really don't agree with you?

Obdicut Sun, Jul 31, 2011 1:38:15pm

re: #7 Bob Levin

That's not how I vote, so I think you're inferring too much.

I'm observing what you wrote, which is a silly caricature of Democratic politicians. If you want me to take you seriously, make a serious argument, not something that sounds like a slightly limp Limbaugh rant.

My theory is that bureaucracy slows down velocity, generally. There are instances when it has increased velocity. It's well informed, but not necessarily ideological.

And you are using bureaucracy as a synonym for government, or ignoring bureaucracy in private enterprise because it doesn't fit with your pre-determined conclusions, or what?

I don't have a one-sided view of things. If your facts are correct, you just explained how it can be, better management structure.

My facts are correct. Why don't you know this? Why aren't you already so-informed?

Then I suggest he makes sure this gets into the headlines and does some network speeches to get this across to the public. I read the news everyday, and those notions need to make the headlines.

He has. He literally has made speeches on the economy that say exactly what I have said. What gets into headlines depends on those that write them, not what Obama says.

I did start out my comments by saying that I'm agreeing with you, precisely because of your use of key words which were compatible with velocity. Are you arguing with me on the contention that I really don't agree with you?

Yes. You say you agree, but then you write a polemic against spending. It's contradictory.

Bob Levin Sun, Jul 31, 2011 2:16:27pm

re: #8 Obdicut

I'm observing what you wrote, which is a silly caricature of Democratic politicians. If you want me to take you seriously, make a serious argument, not something that sounds like a slightly limp Limbaugh rant.

You're not observing, you're inferring. You've misinterpreted, it's that simple.

And you are using bureaucracy as a synonym for government, or ignoring bureaucracy in private enterprise because it doesn't fit with your pre-determined conclusions, or what?

What pre-determined conclusions are you talking about? There are private companies that are badly managed too.

My facts are correct. Why don't you know this? Why aren't you already so-informed?

I believe the extent of my influence over policy is when I walk into the voting booth. I'm not politically active, although I'm interested.

He has. He literally has made speeches on the economy that say exactly what I have said. What gets into headlines depends on those that write them, not what Obama says.

I do what I believe most people do, check out their internet news site. It's part of the President's job to make sure his message gets out to the people. If the headline writers will not cooperate, he's got to solve that problem.

Yes. You say you agree, but then you write a polemic against spending. It's contradictory.

I'll say it again. You used key words in your argument that are compatible with velocity. The economy is not good, velocity is down. If government is involved, then they, not me, they need to have a serious grasp of the relationship between economics and velocity. I will just go to the voting booth.

Obdicut Sun, Jul 31, 2011 2:44:54pm

re: #9 Bob Levin

You're not observing, you're inferring. You've misinterpreted, it's that simple.

No, I'm not. You solely criticized Democrats. You singled them out.

What pre-determined conclusions are you talking about? There are private companies that are badly managed too.

So why are you using bureaucracy as synonymous with government, then?

I believe the extent of my influence over policy is when I walk into the voting booth. I'm not politically active, although I'm interested.

Again: Why aren't you informed?

I do what I believe most people do, check out their internet news site. It's part of the President's job to make sure his message gets out to the people. If the headline writers will not cooperate, he's got to solve that problem.

Wow, you think Obama is magic.

I'll say it again. You used key words in your argument that are compatible with velocity. The economy is not good, velocity is down. If government is involved, then they, not me, they need to have a serious grasp of the relationship between economics and velocity. I will just go to the voting booth.

I'm sorry, this makes no sense. Unless you understand economics, how can you judge the job the government is doing? And why make an economic argument while claiming you're ignorant?

Obdicut Sun, Jul 31, 2011 2:56:56pm

re: #9 Bob Levin

Serious question:

Why don't you fee, as an American citizen, that it's your duty to be informed on the issues?

Bob Levin Sun, Jul 31, 2011 3:44:55pm

re: #10 Obdicut

No, I'm not. You solely criticized Democrats. You singled them out.

Well, that's odd, since I've voted for so many over my life.

So why are you using bureaucracy as synonymous with government, then?

It's the first example of bureaucracy that comes to mind. What's first for you? And I don't think of it as synonymous, merely a darned good example of it.

Wow, you think Obama is magic.

How are you reading this? It's part of the President's job to get his message out. He has an entire department dedicated to this. If they don't do the job, fire them and get people who can do the job. If Coca Cola can do it, so can the President. I don't see any magic here.

I'm sorry, this makes no sense. Unless you understand economics, how can you judge the job the government is doing? And why make an economic argument while claiming you're ignorant?

I don't claim to be ignorant. I think I have a good understanding of economics, and if I don't hear politicians who agree with me, I don't sweat it. It's sad, but I don't get worked up about it.

Bob Levin Sun, Jul 31, 2011 3:47:29pm

re: #11 Obdicut

What do you think I'm doing when I read, post, and comment on LGF? Plus, you don't know my background. I'm very well informed. I'm not omniscient, though.

Obdicut Sun, Jul 31, 2011 4:28:08pm

re: #12 Bob Levin

Well, that's odd, since I've voted for so many over my life.

Did I claim you hadn't?

In this post, you're showing enormous bias against Democrats. That is the sum total of my claim. Your voting record has nothing at all to do with this.

It's the first example of bureaucracy that comes to mind. What's first for you? And I don't think of it as synonymous, merely a darned good example of it.

No, you used it as synonymous, or your argument makes no sense. You equated government spending with an increase in bureaucracy.

And I would say that bureaucracy is equal between government programs and private industry, from what I've seen in my life in the corporate world.

How are you reading this? It's part of the President's job to get his message out.

And he does a lot to do it. He puts out speeches, writes articles, and all of the information I've conveyed has been contained in them.

There is a duty and responsibility to being a citizen. I would like to think it involves actually listening to the president, rather than insisting that it's his job to hand-deliver messages to your door.

I don't claim to be ignorant. I think I have a good understanding of economics, and if I don't hear politicians who agree with me, I don't sweat it. It's sad, but I don't get worked up about it.

Why do you think you have a good understanding of economics?

I'm very well informed. I'm not omniscient, though.

If you're very well informed, how did you go through the entire health care debate without learning the extremely commonly-related and accessible fact that overhead costs for public insurance are much lower than for private insurance?

Prononymous, rogue demon hunter Sun, Jul 31, 2011 4:30:46pm

This is exactly why we are screwed, even if the debit limit is passed. Nobody is considering increasing spending. Even the Democrats have limply acquiesced and are proposing cuts as well. But what we really need now is more spending.

It dovetails well with the article Blueraven posted a few days ago. Consumer demand is low because people are hanging onto their money - they are worried about their jobs and the economy. And companies won't hire unless they see consumer demand increase. Now is the perfect time to inject some money into the economy with infrastructure improvements, tech funding, and other initiatives. And as Obdicut points out, it would be relatively cheap now. But instead we will be cutting spending, lengthening the duration of the recession.

From my perspective, government should act as a counterbalance to the business cycle. During a downturn they should ignore the deficit. That is the time to spend and cut taxes that discourage business growth. Then during the boom times they should focus on reducing deficits by increasing taxes and cutting spending. The effect is to smooth the business cycle, both the dips and the peaks. Velocity is good, but too much can lead to market irrationality.

Bob Levin Sun, Jul 31, 2011 4:54:38pm

re: #14 Obdicut

Do you get the feeling we don't communicate well? It's hard enough to understand people without inflection and body language. Some people just read each other well through their writing, some don't. I don't think we do.

I know what I said, I know what I meant. The next step is diagramming sentences, submitting my daily schedule, my voting record, my academic transcripts and whatever else--for what purpose? We're just not going to understand each other. It happens. It's not a knock. I think it's best if we acknowledge this and move on.

Obdicut Sun, Jul 31, 2011 6:22:45pm

re: #16 Bob Levin

Simple answer:

No.

Obdicut Sun, Jul 31, 2011 6:24:49pm

re: #15 prononymous

The Democrats didn't simply acquiesce, though. The propaganda against the stimulus was 24/7, and it really did play a large part in the last elections. We can't blame politicians all the time. We need to blame ourselves, and to ask why the public is so badly informed. A large part of that reason goes back to the propaganda, and the GOP.

The Democrats don't do a great job of selling their message, but that pales in comparison to the actual disinformation that's put out by the right wing.

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